For software companies, implementing a measurable customer success strategy is the foundation for recurring revenue growth. 96% of companies that identified as having a Customer Success (CS) function (TSIA) agree that their customer success strategy is vital in delivering value throughout the entire customer journey; from acquisition all the way to retention, expansion and advocacy.
But, how do you know if your customer success strategy is actually delivering value to your customers and to your business?
With the vast amount of data at our fingertips, you can measure everything from the amount of time customers spend with your product through to their individual engagements with your team. But for C-suite leaders, the most important customer success metrics are the ones that showcase the impact of your customer success strategy on the retention and expansion of recurring revenue from your customers.
Here are the top 3 customer success metrics that your C-suite leadership team should be analyzing at every board meeting.
1) Net Revenue Retention (NRR)
Net Revenue Retention (or Net Dollar Retention) is THE metric to track for software companies that are seeking to maximize growth and valuation through a recurring revenue model. NRR also just happens to be driven by how effective your customer success strategy is. This makes NRR the ultimate customer success metric that your C-Suite should be tracking.
NRR measures the % of revenue generated during a specific period from existing customers, adding account expansion and cross-sell and subtracting downgrades and churn. In short, it provides a powerful albeit lagging indicator of how good your organization is at both retaining and expanding revenue from your customers.
While there are now several software companies out there enjoying NRR north of 140%, 120% is a great benchmark to shoot for. This type of NRR rate signals a product or service that generates recurring measurable value for customers and that is matched with a pricing model linked to that value. The effects are also cumulative as small increases in retention can add up to large increases in revenue over a few years.
2) Gross Revenue Retention (GRR)
Isn’t Gross Revenue Retention (or Gross Dollar Retention) simply part of the NRR metric above? Yes, it is. However, GRR warrants its own spot in the top 3 list of customer success metrics your C-suite should be tracking. Here’s why.
GRR measures the revenue retained during a specific period from existing customers. Therefore it measures the % of revenue that churned from existing customers. In essence, GRR shows how big the holes in your leaky revenue bucket are.
Your company might have a killer revenue expansion playbook that is generating a positive NRR % but masking a weak GRR %. While benchmarks for GRR vary based on market, anything below 80% GRR should have alarm bells ringing. In most cases, there should be questions asked why GRR is below 90%.
If your C-suite are only looking at NRR and not analyzing the GRR component, they’re likely missing half the picture detailing how effective your customer success strategy is today and therefore where investment needs to be driven.
3) Outcome Achievement Percentage (OAP)
The previous two metrics (NRR and GRR) enable your C-suite to track the value of your customers to your company. Our third top customer success metric enables your C-suite to track the value of your company to your customers.
Did the customer achieve the measurable value they were expecting to? Every C-suite should be tracking the answer to that question across their customer base. It can be tracked using Outcome Achievement Percentage (OAP). Check out this Valuize webinar to learn how to design your customer success strategy so you can start tracking OAP.
By tracking OAP as a customer success metric, your C-suite can start predicting the corresponding NRR and GRR metrics.
Proving The ROI of Customer Success
Net Revenue Retention, Gross Revenue Retention and Outcome Achievement Percentage should create the compelling headline of the customer success metric reporting delivered to your C-suite. Together, they provide an accurate picture of the health of your CS initiatives, its financial viability and value to the overall organization.
Are you ready to build a prescriptive customer success plan that accelerates net revenue retention? Read our latest interview with Valuize CEO, Ross Fulton, on how to unite customer success, tech and data to drive recurring revenue growth.
